Resolve Problem 5-31 with α = 0.3. Using MAD, which smoothing constant provides a better forecast?
In Problem 5-31
Consulting income at Kate Walsh Associates for the period February–July has been as follows:
Month Income ($ 1,000s)
February ........ 70.0
March ......... 68.5
April ......... 64.8
May ......... 71.7
June ......... 71.3
July ......... 72.8
Use exponential smoothing to forecast August’s income. Assume that the initial forecast for February is $ 65,000. The smoothing constant selected is a = 0.1.
Solution:
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